The List

Four Surprises That Could Rock Asia in 2013

Are we paying attention to the wrong crises?

As the world's center of economic gravity shifts from the Atlantic to the Pacific, it's moved from a region of enduring peace to one of pervasive friction. Last spring, China and the Philippines nearly came to blows over a small shoal in the South China Sea. In mid-December, Japan dispatched eight fighter planes after a small Chinese plane entered Japanese airspace, near a group of disputed islands in the East China Sea. North Korea tested another missile in mid-December, and appears to be preparing for a third nuclear test. Peace between India and Pakistan remains elusive, while Indonesia and the Philippines continue to wrestle with Islamic terrorism.

But there are quieter threats to Asia, potentially more explosive than a North Korean missile. Here are four underappreciated threats to the world's most populous region:

Taiwan Independence

Since President Ma Ying-jeou came to power in 2008, Taipei and Beijing have improved ties and deepened their economic integration: cross-strait trade reached $127.6 billion in 2011, an increase of more than 13 percent from 2010. Some national security experts misinterpret this trend, thinking that growing economic interdependence will overwhelm factors pushing the two sides apart, and that interdependence will provide Beijing with leverage it can use to compel unification. But while Taiwan's businesspeople enjoy closer ties with China, the average Taiwanese voter continues to move toward independence. Over the last 20 years, the portion of citizens of Taiwan identifying as "Taiwanese" has increased from 17.6 percent of those polled in 1992 to a whopping 53.7 percent today; those identifying as "Chinese" has declined over the same period from 25.5 percent to just 3.1 percent today. Support for independence has nearly doubled over the last two decades, from 11.1 percent to 19.6 percent. Support for immediate or eventual unification, meanwhile, has more than halved, from 20 percent in 1992 to 9.8 percent in 2012.

Economic integration is apparently failing to halt what Beijing sees as a troubling trend. With a cross-strait trade agreement and a slew of other, easier deals already on the books, Beijing now expects Ma to discuss political issues. But Ma doesn't have the domestic political support to pursue political talks -- in March 2012, two months after his reelection, 45 percent of those polled said the pace of cross-strait exchanges was "just right," but the share of respondents answering "too fast" had increased to 32.6 percent, from 25.7 percent before the election. Any Chinese shift toward a more strident Taiwan policy could portend a new crisis in the Taiwan Strait sooner than many expect, as a lack of progress on these issues may buttress hawks in the new Xi Jinping administration. And America would surely be dragged in: Even low-level coercive measures against Taiwan -- a top 10 U.S. trading partner and security ally -- could throw U.S.-China relations into a tailspin.

Jihadists Attack China

China has managed simmering unrest in its Western region of Xinjiang for decades, including a major riot in July 2009 that left nearly 200 dead. Beijing has long repressed Xinjiang's roughly 20 million Muslims, most of whom belong to the Uyghur minority, denying them the right to freely practice Islam and citing counterterrorism as an excuse for silencing dissent. In the summer of 2011, authorities even outlawed fasting for Ramadan. So far, China doesn't seem to be a preferred target for al Qaeda and other jihadi organizations. Its internal policing -- Beijing spends more on domestic security than on defense -- also makes it a hard target.

But as China extends its economic and military reach around the world, while continuing to repress its sizable Muslim minority, the likelihood of it being the victim of a major terrorist attack increases exponentially. While al Qaeda views the United States as its primary antagonist, it bears ill will toward China as well. According to the Jerusalem Post's translation of a November statement attributed to current al Qaeda head Ayman al-Zawahiri, China is one of "five arrogant powers ... who impose their will on the rest of the world's peoples" through the United Nations Security Council. Zawahiri excoriated the U.N. for its acquiescence in allowing non-Muslim countries to seize Muslim territories, including China's takeover of "Eastern Turkistan," the name by which Xinjiang separatists refer to their territory. Washington's longtime support for the Saudi royal family has provided terrorists with at least a rhetorical rationale for attacking the United States. Beijing's decision to pull closer to Riyadh -- driven by a desire for more flexibility in China's relationship with Iran -- will not win it any plaudits from al Qaeda.

Another risk factor for China is Africa, which, aggregated together, will likely replace the European Union as the country's largest trading partner within five years. Working conditions at Chinese-owned interests in Zambia, for example, are notoriously bad. At a copper mine in 2010, two Chinese managers fired shotguns into a crowd of workers protesting over poor pay and conditions, wounding 11. Some miners in Chinese-run operations in that country must work for two years before they are provided with safety helmets.

China, with its massive business interests in Nigeria, Niger, Algeria, and Sudan (all unstable nations host to large Muslim populations) -- and with a sustained naval anti-piracy mission off the coast of Somalia -- might increasingly find itself the recipient of violence that has thus far been directed elsewhere. Attacks like the April 2007 raid of a Chinese oil concern in Ethiopia by Somali separatists, which killed 74 Africans and nine Chinese workers, could become much more common.

Beijing may have concluded that such is the cost of doing business in Africa. But a terrorist attack on its own territory would be a shock. Beijing would likely respond to a major internationally launched terrorist attack in China by expanding its already intrusive surveillance apparatus and further limiting civil liberties -- especially in places like Xinjiang and Tibet. (After the July 2009 riots, Beijing took the extraordinary step of shutting off most of the Internet throughout the region for 10 months.) A devastating terrorist attack could make China rethink its longstanding policy of non-interference in other country's domestic affairs, which, despite its maritime meddling, it has kept since its 1979 invasion of Vietnam. On the positive side, the United States might find common cause in combating Islamist terrorism. But if the ruthlessness of China's domestic counterterrorism is mirrored in its foreign ventures, the United States and China would find themselves at loggerheads.

The U.S. Navy Can't Save the Day

On December 26, 2004 a massive tsunami in the Indian Ocean caused the deaths of over 230,000 people and left widespread devastation in its wake. In response, the Pentagon launched Operation Unified Assistance, at a cost of $200 million, as part of a U.S. government effort to provide relief to afflicted areas. It deployed more than 11,000 people, 29 ships, and 46 airplanes. The United States had the logistical ability and the budget to provide medical care to the sick and injured, food to the hungry, hope to the hopeless while fighting wars in Iraq and Afghanistan.

In 2004, when the tsunami struck, the United States had a naval fleet of 292 active ships. The Navy estimated that if budget sequestration -- automatic cuts to the defense budget provided for in the 2011 Budget Control Act -- occurred, actual fleet size could drop to roughly 230 ships in a decade. Republicans in The House Armed Service Committee estimated in September 2011 that sequestration would cut the number of U.S. airlift planes from 651 to 494. The fiscal cliff deal reached on New Year's Eve delayed sequestration by two months. Even if sequestration is averted, new defense cuts will be part of a deficit reduction agreement. These, combined with the $889 billion in cuts already approved during President Obama's first term, will reduce U.S. capability and its ability to fund expensive rescue missions.

The King of Thailand Dies

The 85-year-old King Bhumibol Adulyadej has been Thailand's head of state since 1946. Over the past several decades of his rule, Thailand has seen numerous coups, wars in neighboring states, economic booms, and economic busts. Violent street protests in 2010 left more than 90 dead and 2,000 injured, and 2012 saw a deepening constitutional crisis. Through it all, Bhumibol's immense popularity and moral authority had ensured that he remained a crucial and stabilizing figure in Thai politics.

Lèse majesté laws restrict criticism of the king, but his popularity amongst Thais is not in doubt. The same cannot be said for his son and heir, the Crown Prince Vajiralongkorn, who has had three wives (compared to his father's one wife of 62 years) and threw a lavish and unseemly birthday party in 2009 for his miniature poodle Foo Foo. Thais may be legally barred from saying so, but the king's passing and the crown prince's coronation is a worrying eventuality. After a rumor of his ill health swept the country in October 2009, the Thai stock market dropped more than 8 percent and the value of the baht tumbled. Bhumibol's death could usher in a new period of Thai politics, in which the new king lacks the authority or charisma to impose stability on an unstable system.

Enduring unrest could destabilize Thailand's neighbors, including the fragilely democratizing Burma, and make Bangkok a less reliable treaty ally for Washington as the U.S. pivots to Asia. And Thailand's economic health matters: The 1997 collapse of the Thai baht set off the Asian financial crisis, whose global economic fallout included the sudden devaluation of the Russian ruble and the collapse of what was then one of the United States largest hedge funds.

The threats posed by territorial disputes in the East and South China Seas are imminent. North Korea has the potential to collapse quickly and without warning. But it is precisely because these issues are so pressing that the crises described above could take Washington by surprise.


The List

The Nudgy State

How five governments are using behavioral economics to encourage citizens to do the right thing.

In the January/February issue of Foreign Policy, behavioral economist Richard Thaler urges governments to "apply behavioral science to find solutions to persistent problems." Here are five places that are already doing just that.


United States

U.S. President Barack Obama gave behavioral policymaking its highest profile endorsement yet in 2009 by appointing Harvard legal scholar and Thaler's Nudge coauthor Cass Sunstein to run the White House's Office of Information and Regulatory Affairs. As "regulation czar," Sunstein was given a wide mandate to apply cost-benefit analyses to programs including the new health-care law and the Dodd-Frank financial regulations. Sunstein, who stepped down last summer, was never popular with conservatives, who saw the "libertarian paternalism" of Nudge as nanny-statism in disguise.

From a public point of view, the most visible of the reforms championed by Sunstein may have been the transformation of the FDA's food pyramid, dutifully reviewed and ignored by generations of schoolchildren, into a more intuitive plate design, which shows how much of an average meal should be taken up by fruits, vegetables, grains, protein and dairy. Another program pushed by his office,, allows car buyers to compare fuel costs of a car against an average vehicle -- rather than expressing it in non-intuitive statistics like miles per gallon. Sunstein claims the federal regulations put in place during Obama's first term saved more than $90 billion per year for the U.S. government.



Prime Minister David Cameron frequently expressed his admiration for Nudge, the ideas of which meshed well with the more state-centric brand of conservatism -- known as "big society" -- that the Tory leader championed on the campaign trail. In 2010, Cameron set up the Behavioural Insights Team -- quickly dubbed the "nudge unit" by the press -- a group of behavioral economists, with Thaler acting as a consultant, given a mandate to "find innovative ways of encouraging, enabling and supporting people to make better choices for themselves."

The unit has undertaken a number of trial programs so far. In one, non-payers of car taxes were sent a letter, including a picture of their car, warning in plain English that their vehicle would be lost if they did not pay up. Including the photo tripled payment rates. The unit has also seen enormous success in informing people by text message that they're late on taxes or fines.

In another intervention, insulation firms set up a service to clean out customers' attics while installing insulation. (It was found that people were much more likely to pay for new energy-saving insulation if they didn't have to go through the trouble of sorting through years worth of junk.) The unit has been an occasional target of ridicule on Fleet Street, but its interventions have been successful enough -- about £300 million ($485 million) in savings so far -- that other governments are looking to copy it.


New South Wales, Australia

In September 2012, the government of Australia's most populous state announced that it would consult with Britain's nudge unit to formulate new policies over a wide variety of areas. As in other places that have adopted behavioralist ideas, the new plan was decried by some commentators as a "toxic import from Britain" and a "threat ... to democratic public life." But the New South Wales government -- like Britain, controlled by the center-right -- is clearly intrigued by the prospect of increasing government revenue and promoting virtuous behavior in citizens without resorting to direct state interventions.

One program the New South Wales government may copy from Britain is using "peer influence" on citizens. Informing them, for instance, of how much energy their neighbors are using, or how many residents of their town have already paid taxes or fees. By and large, people don't want to be outliers and tend to moderate their behavior if they know that their neighbors are showing them up.



In 2010, the behavioral philosopher Pelle Guldborg Hansen set up the Danish Nudging Network, an NGO that partners with governments and companies to develop policies rooted in behavioral theory. Most of its ideas are still in the experimental stage, but some show promise. In one experiment conducted by the network, signs were placed next to light switches at a university saying that 85 percent of students remembered to turn off the light when the left the room. The signs led to a 20-26 percent reduction in lights being left on. In a collaboration with the city of Copenhagen, the nudgers put green footprints leading to trash cans in public spaces, which they found reduced littering by 40 percent.

Sometimes, interventions are not so successful. When the network partnered with the Danish National Railway to put arrows leading to staircases in front of station elevators -- encouraging commuters to take the healthier route of walking up the stairs -- there was almost no effect. Hansen told the Economist, "There are no social norms about taking the stairs but there are about littering."


Western Cape, South Africa

One of the most controversial applications of behavioral economics to public policymaking has been Western Cape Premier Helen Zille's "Get Tested and Win" campaign, launched in 2011, which enters anyone who gets an HIV test into a drawing for cash prizes up to nearly $6,000. The program developed out of a workshop conducted by ideas42, a Harvard-affiliated organization set up to develop psychology- and economics-based strategies for developing social and economic policy. (The name comes from the answer to the meaning of life in The Hitchhiker's Guide to the Galaxy.) The government also worked with ideas42 to develop new strategies to reduce traffic fatalities.

"Get Tested and Win" was blasted by critics, including the South African Medical Association, which called it "inappropriate and medically unethical." It probably doesn't help that Zille, the leader of South Africa's opposition Democratic Alliance party, has also controversially called for HIV-positive men who knowingly have sex without condoms to be charged with murder. But Zille, who criticizes the national government for encouraging a climate of AIDS denialism, is pressing ahead with the initiative. A similar program is also being planned that will enter schoolchildren who attend afterschool programs and pass drug tests into a raffle for shopping vouchers.